Settlement agreement may not kill OT claims

Here’s a reminder that settling a lawsuit may not be as final as you think, even if there’s a payment involved. The 5th Circuit Court of Appeals has ruled that settling a state court lawsuit over a noncompete agreement (with a payment and an agreement that supposedly included all employment claims) didn’t bar the former employees from suing for unpaid overtime that they claimed was owed to them under the Fair Labor Standards Act (FLSA).

Recent case: After Ambre and Leslie left their jobs at TXL Mortgage, they went to work for another employer. TXL sued them in state court, claiming their new jobs violated a noncompete agreement they had signed while working for TXL.

The case was settled, with a payment to the former workers in exchange for a waiver of “all claims and causes of action related to or in any way arising from defendants’ employment with TXL, whether based in tort, contract (express or implied), warranty, deceptive trade practices, or any federal, state or local law, statute, or regulation.”

TXL asked the court to throw out the case, reasoning that the general settlement agreement covered overtime claims, too, since they would have arisen from employment.

But the court disagreed. It reasoned that an FLSA claim settlement either had to have been approved by the DOL or at least have been a specific part of the litigation being settled. That way, it would be clear that the employees understood their rights and were compensated for the claimed unpaid overtime. The court said Ambre and Leslie could continue their overtime lawsuit. (Bodle, et al., v. TXL Mortgage, No. 14-20244, 5th Cir., 2015)